What are the key spend performance indicators for different categories and industries?

Key spend performance indicators include cost savings, supplier performance, and compliance rates. These metrics vary by industry but are essential for tracking efficiency and strategic value in procurement.

As SPIs (Supplier Performance Indicators) s?o realmente valiosas para avaliar a eficácia na gest?o de gastos e o alcance das metas de compras. Ao medir diferentes dimens?es, como volume, varia??o, conformidade, economia, eficiência e qualidade de gastos, as SPIs oferecem uma vis?o abrangente dos padr?es de gastos, permitindo identificar oportunidades de melhoria e benchmarking com outros colegas e práticas do setor.

Spend Performance Indicator. First time I read about this word. I think it's pretty clear, that's it's all about KPIs in the Procurement Field, especially everything Spend related. So why are they important? - KPIs keep everyone on track. When teams rally around shared KPIs, they align efforts toward common goals. - KPIs quantify success. Whether it’s Cost Savings, Spend Development, or maybe something ESG-related like a conflict mineral metric , KPIs provide tangible benchmarks. - KPIs signal trouble. An increase in time to delivery + decrease in financial rating of your supplier? That's something you might wanna have on your radar. A well-chosen KPI isn't just a metric—it’s a strategic superpower!

Cost Savings is particularly relevant for industries where procurement is a significant part of the overall cost structure. Higher Purchase Order Accuracy rates can help improve operational efficiency, reduce lead times, and minimize rework. Contract Compliance is important for industries with complex supplier relationships and long-term contracts. Shorter payment terms can help improve supplier relationships, reduce the risk of supply chain disruptions, and potentially lead to better pricing. Supplier Performance is relevant for industries where supplier relationships are critical to success. Category Spend is useful for tracking spending trends over time, identifying cost-saving opportunities, and benchmarking against industry averages.

Some years ago, I worked with a client who had a room plastered with KPIs and charts. It was an overwhelming display of metrics, but ironically, it led to a lack of focus. Instead of clarity, the abundance of data points created confusion, making it difficult to discern which KPIs were truly important for the business. My lesson learned was to select only "one metric that matters" and max 3-4 other KPI's.

To further enhance your approach to selecting the right SPIs for your category and industry, it's essential to delve deeper into specific considerations tailored to your unique circumstances. There are two points I want to mention: Contextual Relevance: Beyond general applicability, assess the contextual relevance of each SPI to your industry dynamics, market position, and strategic priorities. A metric may be widely used but may not capture the nuances crucial for your specific context. Granularity and Specificity: Consider the granularity and specificity of the SPIs. While high-level metrics provide an overview, deeper insights often lie within more granular data points. Key is to find the right balance.

When selecting KPIs, it’s essential to choose those that are most relevant to your strategic goals. They should be measurable, actionable, and simple to understand. They should also provide the right context or benchmark. What is the target, do you see improvement versus last year etc.

In procurement, select KPIs that mirror strategic goals. Financial KPIs like Savings and Cost Avoidance measure cost efficiency. OTIF and Quality Issues gauge supplier performance. Process efficiency is tracked via Invoice per Order and Cycle Time. Risk is managed by Contract Compliance and Supplier Risk Assessment. Balance these for a robust procurement strategy. And I hope everyone will at include least one sustainability goal. For instance supplier's adherence to code of conduct.

Establishing a repeatable process for monitoring KPIs is crucial. While Excel is a common tool, it often means starting from scratch each time. Instead, consider using specialized software like Sievo or SpendExplorer, or create a custom analysis in Power BI or Tableau. These tools provide consistency and efficiency, allowing for better tracking and analysis over time in realtime.

When setting goals for SPI improvement (result), it’s beneficial to establish sub-goals (process) that lead up to the main objective. This step-by-step approach allows for a clear pathway to success and makes it easier to measure progress. Once a sub-goal (process/action) is achieved, assess its impact on the overall SPIs (result). This method not only tracks incremental progress but also clarifies how each milestone contributes to enhancing spend performance. Rethink your sub-goals if they do not improve your SPI.